Correlation Between Carters and Space Communication

Can any of the company-specific risk be diversified away by investing in both Carters and Space Communication at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Carters and Space Communication into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Carters and Space Communication, you can compare the effects of market volatilities on Carters and Space Communication and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Carters with a short position of Space Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carters and Space Communication.

Diversification Opportunities for Carters and Space Communication

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Correlation Coefficient

Carters  Space Communication

Pay attention - limited upside

The 3 months correlation between Carters and Space is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Carters and Space Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Space Communication and Carters is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Carters are associated (or correlated) with Space Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Space Communication has no effect on the direction of Carters i.e., Carters and Space Communication go up and down completely randomly.

Pair Corralation between Carters and Space Communication

Considering the 90-day investment horizon Carters is expected to generate 0.48 times more return on investment than Space Communication. However, Carters is 2.08 times less risky than Space Communication. It trades about -0.03 of its potential returns per unit of risk. Space Communication is currently generating about -0.04 per unit of risk. If you would invest  7,614  in Carters on October 13, 2024 and sell it today you would lose (2,437) from holding Carters or give up 32.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

Carters  vs.  Space Communication

Carters

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Carters has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Space Communication

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Space Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Space Communication is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Carters and Space Communication

The main advantage of trading using opposite Carters and Space Communication positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carters position performs unexpectedly, Space Communication can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Space Communication will offset losses from the drop in Space Communication's long position.

The idea behind Carters and Space Communication pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.